1) Rationales for costing

Question 1

Define Management Accounting

Answer 1

The application of the principles of accounting and financial management to create, protect, preserve and increase value for the stakeholders of for-profit and not-for-profit enterprises in the public and private sectors.

Question 2

Define Cost Accounting

Answer 2

The gathering of cost information and its attachment to cost objects, the establishment of budgets, standard costs and actual costs of operations, processes, activities or products; and the analysis of variances, profitability or the social use of funds.

Question 3

Name some Operational Decisions (Low level Managers)

Answer 3

Day to day decisions
How much staff, machines or material to use
Where will the above be used

Question 4

Name some Tactical Decisions (Medium level Managers)

Answer 4

Staff training and recruitment
Changing suppliers
Purchasing of new machines

Question 5

Name some Strategic Decisions (High level Managers)

Answer 5

Launching new products
Expanding into new markets
Acquisitions

Question 6

Examples of Quantitative Data

Answer 6

How much a piece of material costs

How long should staff spend on a particular service

Question 7

Examples of Qualitative Data

Answer 7

Customer Satisfaction

Employee motivation

Question 8

Define Financial Accounting

Answer 8

Classification and recording of the monetary transactions of an entity in accordance with established concepts, principles, accounting standards and legal requirements and their presentation, by means of statements of profit or loss, statements of financial position and cash flow statements, during and at the end of an accounting period

Question 9

What are the three elements of Management Accounting?

Answer 9

Planning
Control
Decision Making

Question 10

Define ‘Planning’ in Management Accounting

Answer 10

Establishing objectives and goals of an organisation
(What are they trying to achieve, formulating long term strategies)

MA’s will create budgets for different scenarios

Question 11

Define ‘Control’ in Management Accounting

Answer 11

The process of monitoring, measuring, evaluating and correcting actual results to ensure that the organisation’s plans are being achieved.
Budget variance analysis would be sent to the MA

Question 12

Why are Management Accountants now seen as value-adding business partners?

Answer 12

Now needed, not only for forecasting but to assist in enhancing organisational performance as mentors, advisers and drivers of performance

Question 13

Define a cost unit

Answer 13

A unit of product or service in relation to which costs are ascertain
eg. The cost to make a mobile phone

Question 14

Define a Cost Centre

Answer 14

Is a production or service location, a function, an activity or an item of equipment for which costs are accumulated
eg. The production cost centre in one month costs $100k to create 1k units

Question 15

What are the three main ways to classify a cost

Answer 15

1) by behaviour - Fixed, variable or semi variable cost (bit of both)
Fixed = rent , insurance, salaries
Variable = direct material, labour and direct overheads
Semi variable = Gas, electric, water
2) by element - Material, labour or expense cost (rates, utilities, postage)
3) by nature - Direct costs (prime costs) or Indirect costs (overheads)